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Movie Studios Can Now Own Theaters, Reversing 72 Year Old Rule
Movie studios can now own movie theaters, changing a seventy-two-year-old rule. The decision ends the Paramount Consent Decrees, established in the landmark 1948 U.S. Supreme Court case United States v. Paramount Pictures. The original antitrust decision in 1948 came as studios such as Paramount and Warner Brothers were accused of having a leg up over smaller or independent studios. The case determined not only that studios could not own theaters, but also determined the ways that films could be licensed and distributed.
The decision prohibited practices of vertical integration, block booking, and circuit dealing. Vertical integration is the practice of one company controlling all the steps of the sales process — i.e., not only controlling production but distribution of films as well. Block booking refers to studios only licensing movies if theaters are willing to screen other films from the same studio. Circuit dealing is a practice where chains buy licenses for all of their theaters, instead of allowing each location to choose films individually. While not mentioned in the original decision, other studios like Walt Disney have been bound by these standards for the past seventy-two years. However, the rules have just changed.
According to THR, U.S. District Court Judge Analisa Torres ruled that these decrees have outlived their usefulness. This decision comes on the heels of the Department of Justice's move to terminate these rules last November. Torres wrote in a 17-page opinion that "Given this changing marketplace, the Court finds that it is unlikely that the remaining Defendants would collude to once again limit their film distribution to a select group of theaters in the absence of the Decrees" and also said that ending the rules is in the public's interest. The change will not take effect immediately; instead, there will be a two year "sunset period."
This change comes amid renewed debate regarding the role of movie theaters in the streaming age. Disney recently announced its upcoming live-action Mulan would be released directly to Disney+ in addition to theaters in some markets. Movie theater owners felt "blindsided" and betrayed over the decision. Streaming platforms Netflix and Amazon have attempted to acquire theaters in recent years, further encroaching on unfamiliar territory.
Between an increased reliance on streaming platforms and closures due to the coronavirus pandemic, movie theaters have already been having a tough time. This decision could spell big trouble for theaters, particularly smaller independent ones and those in rural areas that may only have one or two screens. With a studio like Disney owning so many enormous franchises — Star Wars, Marvel, Avatar — theaters could be placed in a position of having to choose between not showing the biggest movie of the year or being forced to showcase other movies that might lose them money. The two year sunset period could allow for a legal fight, especially if there is a change in presidential administration this autumn. As of right now, however, the Paramount Consent Decrees are no more.
